MADRID – Shortly before midnight, the Spanish cabinet announced measures to ease the mortgage payments of vulnerable households. This benefits one million households.
The measures will be approved by the Council of Ministers on Tuesday. However, it does apply to the financial entities that can voluntarily apply the measures from the package. The package is grouped into two boxes:
For vulnerable households: Extension of mortgages and grace periods is possible, as well as temporary non-payment…
For the rest of the households: abolition of commissions so that people can pay in advance without penalty.
Mortgage payment takes up 50% income
The first measures apply to vulnerable households, those with an income of less than €25,200 per year (three times the IPREM*) and who spend 50% or more of their income on paying the mortgage, whose interest has already fifty% increased.
As of Tuesday, it is assumed that these households will no longer be able to pay their mortgages and therefore the banks will stop collecting the “principal” of the borrowed capital. That is, for 5 years they only charge the interest and that interest will be the lowest (Euribor minus 0.1%).
In addition, a two-year arrangement is made for these people who cannot pay the mortgage. This allows the customers to hand over the keys and settle their debt with the bank.
Households at risk of default
These are households that meet the following requirements: they have an annual income of fewer than €25,200, and their mortgage represents 50% of their monthly income.
These households can set up a backlog of 2 years. This means that during this period the bank only charges interest. In addition, they can extend their mortgage for up to 7 years to reduce their monthly amount.
Other measures for slightly higher incomes
There is a third group of measures for somewhat higher income levels (up to €29,400) with mortgages taken out until 31 December 2022, provided that they pay mortgages that consume 30% of their income and the interest on which has risen by 20%.
These households can pay interest only for a year and also extend the term of their mortgage to 7 years.
IPREM is the abbreviation of ‘Indicador Público de Renta de Efectos Múltiples’ and is the reference index in Spain for the allocation of aid and subsidies based on income. The index was introduced on July 1, 2004, to replace the Minimum Interprofessional Wage whose use was limited to the workplace.